Virgin Atlantic's US$1.6b rescue approved by British court

[LONDON] Virgin Atlantic Airways secured backing from a UK court for a US$1.6 billion rescue package Wednesday that will keep billionaire Richard Branson's airline afloat amid the coronavirus pandemic's ravaging of the travel industry.

The ruling by Judge Richard Snowden clears the path for a bailout that will see US hedge fund Davidson Kempner Capital Management provide funds to the carrier alongside Mr Branson, its founder.

Judge Snowden said he was "satisfied" with the plan. None of the creditors opposed the approval at the hearing.

Virgin Atlantic saw demand cut to a quarter of 2019 levels in the first half of the year and was denied aid by the UK government after the virus grounded flights. The Crawley, England-based carrier cut more than 3,000 staff and the remaining 6,500 jobs were at risk as chief executive officer Shai Weiss warned that the airline will run out of cash within weeks without a rescue.

An American procedural court hearing is due to take place as part of the firm's Chapter 15 bankruptcy protection that's aligned with the British proceedings.

Last week, Virgin Atlantic secured the backing of trade suppliers, the last of four creditor groups that needed to agree for the plan to go ahead. Mr Branson will inject around 200 million pounds (S$362.6 million) in the business, while Mr Davidson Kempner contributes about 170 million pounds to the package and trade creditors take a 20 per cent haircut.

Under the airline's UK court-sanctioned restructuring process, a judge could have pushed the plan through at the hearing even without the support of all creditors in a so-called cram-down of dissenting lenders.

BLOOMBERG